the full picture, this week – 23 March 2018
In our weekly roundups, the encompass team take you through all the breaking news on Know Your Customer (KYC), compliance and financial crime, keeping you informed at all times.
financial crime and anti-money laundering
Leading on financial crime, media and information leader, Thomson Reuters have written a polemic on the failures of money laundering legislation, noting that banks are using simple transaction history to detect money launderers, and using the example of Hezbollah to illustrate these failures.
The Law Society Gazette has noted the positive reaction from law firms in appointing executives to oversee anti-money laundering provisions. They note:
“The Solicitors Regulation Authority said today that 96% of firms have now appointed an anti-money laundering compliance officer (MLCO). The compliance officer is a board level position in addition to the money laundering reporting officer (MLRO), responsible for day to day monitoring.”
The Law Society have published the changes from the draft to final version of AML guidance, as approved by the Treasury. The role of automation in the AML/KYC process for law firms will be discussed further by legal compliance expert Amy Bell in a breakfast seminar on Tuesday 10 April in central London – click here for further information and booking.
In international news, the Organised Crime and Corruption Reporting Project have outlined problems with Latvia’s investigations into money laundering, noting that of 17,000 questionable transactions, only 85 investigations were ever reported.
Staying on an international theme, former French President Nicolas Sarkozy has fallen foul of French investigators, who have placed him under formal investigation in relation to monies received with possible ties to former Libyan dictator Muammar Gaddafi. The BBC has led the way on reporting this story, with CNN reporting Sarkozy protesting his innocence the Guardian and Politico, who have written that Sarkozy will be charged with illegal campaign financing and receiving Libyan public funds.
If you’ve ever used a little-known website called Facebook, then read on….
The tech behemoth has become embroiled in a data-breach scandal in which it has been leaked that Facebook tacitly allowed up to 50m user’s details to be mined by British firm Cambridge Analytica for the purposes of user profiling and ad targeting.
The story features across nearly every news outlet in the western world, but we’ve picked out features from The New York Times, the Guardian, CNN, Inc Magazine, Channel 4, BBC, Huffington Post and Business Insider as noteworthy.
The story centres around former Cambridge Analytica employee Christopher Wylie, who has stated the firm gained access to the information of 50 million Facebook accounts through a third-party research app that offered a personality quiz in return for allowing access to information on their Facebook profile and those of their Facebook friends. While some 270,000 people are said to have used the personality-quiz app, Wylie said it was able to harvest data from 50 million Facebook accounts through the friend networks of those participants. Cambridge Analytica was founded by one time chief strategist to President Trump, Steve Bannon, and Robert Mercer, a top Republican donor.
The leaks were made public by the Guardian newspaper and Channel 4 news, who also secretly filmed Cambridge Analytica CEO Alexander Nix making claims about running Donald Trump’s presidential campaign, an assertion that may be unlawful. Cambridge Analytica have subsequently suspended Nix pending an investigation.
The BBC have asked, following the scandal, is it time to leave Facebook? Technology reporter, Jane Wakefield, illustrates what steps users can take to keep their information private, noting that ultimately, the only sure-fire way is to delete the app. Indeed the hashtag #DeleteFacebook has been trending across Twitter this week, even having WhatsApp Co-Founder Brian Acton (WhatsApp is owned by Facebook) tweeting his support.
Business Insider have focused their attention on the parent company of Cambridge Analytica, SCL Group. SCL purportedly offered a $1.4m bribe to secure an election in St Kitts and Nevis on behalf of the country’s Labour party, who was a client of the company.
“Under the guidance of Brad Parscale, Mr. Trump’s digital director in 2016 and now the campaign manager for his 2020 re-election effort, Cambridge performed a variety of services, former campaign officials said. That included designing target audiences for digital ads and fund-raising appeals, modeling voter turnout, buying $5 million in television ads and determining where Mr. Trump should travel to best drum up support.”
Damian Collins, chair of the Digital, Culture, Media and Sport select committee in the House of Commons has said he will call both Mark Zuckerberg and Alexander Nix to give evidence, while a swathe of UK politicians from across the spectrum have taken the opportunity to air their displeasure at recent events. Regulation of technology firms such as Facebook was the focus in the Huffington Post, who report that it may be necessary for Congress in the US as well as other governments to regulate their activities.
Facebook itself is the subject of Inc Magazine’s reporting, noting that the Federal Trade Commission is investigating the internal practices of the firm, with further investigations from both sides of the Atlantic and the EU likely to be forthcoming.
Shares in Facebook have fallen considerably as a result of the scandal.
Remember the Panama Papers data breach? The law firm at the centre of the scandal, Mossack Fonseca has announced that it due to close, citing the reputational damage caused by the leak. And in further Panama Papers fallout, Indonesia has announced new legislation requiring all companies to disclose their Ultimate Beneficial Owners (UBO), as reported by the International Consortium of Investigative Journalists.
In The Telegraph, journalist Harry de Quetteville profiles some of the most successful startup founders including Deliveroo founder Will Shu and Anne Boden, CEO of Starling Bank, and examines the companies trajectories to date.
Writing in Finextra, Derek White, global head of customer and client solutions at BBVA refutes the suggestion that only big tech is truly serving customer need, and that banks can innovate to give customers the solutions they require.
FinTech and RegTech
The world of FinTech and RegTech is constantly evolving, and this week there has been a plethora of articles, particularly focusing on the UK Government’s FinTech strategy and calls for a global regulatory sandbox.
The Chancellor Philip Hammond launched the UK’s FinTech strategy Thursday, with the creation of a UK-Australia “FinTech bridge’, and a cryptoassets task force. Further details of the launch can be found on CNBC.
The global sandbox has been covered in several publications, including Finextra who report that the FCA will begin working with regulators in the US and EU on a blueprint for a global regulatory sandbox. They state:
“On how a global sandbox might work in practice, suggestions ranged from a ‘global dictionary’ which covers data needs across different countries to a joint mission statement from participating regulators.”
This story has also been covered by Cryptocurrency Investing, who quote FCA board member and Director of Strategy and Competition, Christopher Woolard, as saying the sandbox is required to allow firms to “grow at real scale and pace”.
Winnie Tang of the University of Hong Kong has argued that Hong Kong is well placed to tap into the opportunities from the burgeoning RegTech sector in China Daily – perhaps illustrating RegTech’s move from the niche to the mainstream.
There were more than a few commentaries discussing the future of RegTech, not least in RegTechFS, who have discussed what future innovations such as AI and machine learning will have on the sector.
The Financial Stability Board (FSB) of which Mark Carney is chair, has written to the G20 explaining that, at least for the time being, cryptocurrencies do not pose a risk to global financial stability. They however highlight that were cryptocurrencies to become used more widely or interconnected with the global financial system that this may be subject to change.
Jack Dorsey, CEO of Square, and formerly of Twitter, has made the headlines this week, stating that within ten years Bitcoin will be the world’s leading currency – putting him at odds with Carney and the FSB’s assessment.
In a final assessment of cryptocurrencies, financial services and tech expert Chris Skinner has written on his blog responding to the assertion that crypto and digital currencies are used prevalently by criminals and money launderers – pointing out that it is in bankers best interests to make these claims because they could be replaced by digital currencies, which moreover, show to have far less fraudulent activity than traditional forms of banking.
The world of Know Your Customer (KYC), compliance and financial crime never sleeps, and if your challenges are keeping you up at night let us help. encompass robotically automates information and news discovery for KYC requirements for onboarding, event-driven refresh and remediation.
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